World Economy

Zanzibar Plunges Into Deflation

Zanzibar Plunges Into DeflationZanzibar Plunges Into Deflation

Zanzibar has registered deflation of -0.2 percent in March, from -1.7 percent in February, driven mainly by fall in food and fuel prices.

It is the opposite of the often-encountered inflation. Deflation, according to economists, occurs following reduction of money supply or credit availability, AllAfrica reported.

Economists argue that it is often associated with reduced investment spending by government or individuals. “Deflation leads to a problem of increased unemployment due to drop in demand,” according to an economist.

The Bank of Tanzania (BoT) monthly economic review of April says “month-to-month headline inflation was negative 0.2 percent in March 2015 compared with negative 1.7 percent in the preceding month”.

The central bank attributed the month-to-month deflation to food inflation which went down to negative 1.6 percent in March compared with negative 0.1 percent.

“(This was), mainly on account of decrease in prices of rice, fish and bread,” BoT says in the report. However, non-food inflation eased to 0.1 percent during the year ending March 2015 from 1.9 percent recorded in February 2015, mainly driven by a continued fall in fuel prices.

Normally central banks aim to keep the overall price level stable by avoiding situations of severe deflation or inflation. Both deflation and severe inflation may infuse a higher money supply into the economy to counter-balance the deflationary impact. In most cases, a depression occurs when the supply of goods is more than that of money.

  Core Inflation

Meanwhile, the report shows, annual inflation which excludes food and energy (core inflation) rose to 2.9 percent in March from 2.7 percent in the preceding month.

Annual inflation for energy and fuels dropped to negative 10.1 percent from negative 2.0 percent in line with recent developments of falling prices in the world market for fuel. On the other hand, annual inflation declined to 0.9 percent in March 2015 from 1.7 percent in the previous month, mainly driven by fall in prices of wheat flour, sugar, banana and fuel.

Meanwhile, Tanzania is showcasing her exotic spice riches in the Expo Milano 2015, in Milan, Italy. Tanzania Trade Development Authority (TANTRADE) Director General, Ms Jacqueline Mneney Maleko, told reporters in Dar es Salaam that the organizers have offered Tanzania 500 posts of traders to showcase spices products.

“Participation of the country in Expo 2015 focuses on promoting opportunities available in the country. Tanzania with Afghanistan, Vanuatu, Brunei and Sri Lanka will take part in the spices category,” she said.

Under the theme ‘Experience Tanzanian Culture Through Food and Spice’, the country will use the expo to promote opportunities available in the country including tourism, businesses and economic areas, she said.